China overtook Germany to become the world’s third-largest economy in 2007 after the Chinese authorities revised upwards the figures for growth during that year.
China’s National Bureau of Statistics said on Wednesday that the economy expanded by 13 per cent in 2007, a sharp increase from the 11.9 per cent growth rate the authorities had previously stated.
With only the US and Japan larger than China, the new figures highlight the rapid transformation that the Chinese economy has undergone during the past 30 years since Mao-era controls were eased, although it is experiencing the toughest period in a decade as a result of the global financial crisis.
The fresh data will reinforce the case to give China and other large emerging economies a bigger role in global financial decision-making, even though China has been hesitant about taking on new responsibilities.
“It is symbolically significant that China is now bigger than Germany and it will not be too long before its economy overtakes [that of] Japan,” said Mark Williams at Capital Economics in London.
Many economists reckon that Chinese growth in 2009 will fall well short of the 8 per cent government officials are forecasting. It has slowed sharply in recent months. However, given the steep declines forecast for many developed economies, China will remain one of the main contributors to global growth.
In the medium-term, economists say that there is plenty of scope for China to maintain relatively high growth rates. Urbanisation and technology catch-up have decades to run. But the outlook is complicated by a rapidly ageing population and costs of damage to the environment.
Goldman Sachs forecasts that the Chinese economy will overtake that of the US by about 2040. The Economist Intelligence Unit forecasts in terms of purchasing power parity – which adjusts for price differences between countries to reflect actual buying power of local incomes – China will outstrip the US by 2017.
Despite rapid growth and hundreds of millions of people lifted out of poverty, China remains relatively poor. In the World Bank’s rankings of GDP per capita for 2007 using purchasing power parity, China took 122nd place at $5,370, behind Egypt, El Salvador and Armenia.
According to the IMF, Germany’s GDP was $3,321bn in 2007, using market exchange rates for that year. By the new estimate China’s GDP was $3,382bn. US GDP was $13,807bn and Japan $4,382bn. China is also close to surpassing Germany to be the world’s biggest exporter.
It was the second time China had revised upwards growth figures for 2007’s GDP, first calculated to be 11.4 per cent. Some suspect Chinese authorities of massaging figures to underplay economic volatility, exaggerating growth when conditions are tough, underestimating it when the economy is booming.
Germany’s economy has also slowed sharply, perhaps contracting by as much as 2 per cent in the fourth quarter, its statistical office said. First estimates, indicating that gross domestic product fell by between 1.5 per cent and 2 per cent compared with the previous three months, emphasise the downturn.
That is likely to intensify fears Germany’s recession will be the worst since the second world war, dragging down economies continent-wide. That would pressure policymakers to beef-up emergency rescue packages.
Additional reporting by Ralph Atkins in Frankfurt
Copyright The Financial Times Limited 2009
